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Moody’s: It is Quite Possible Greece to Suspend Payments on Its Debt

15 June 2010 / 10:06:52  GRReporter
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The international credit rating agency Moody’s lowered the credit rating of Greece with four degrees and put it in the Ba1 category – of the countries which are considered that would suspend payments on their debt. According to the Agency analysts, cited by Reuters, the rescue plan of the International Monetary Fund and the European Union offsets in the medium term the risk for the payment of the external debt of Greece and encourages the application of a set of credible and strengthening competitiveness reforms. However, the agency believes that the long-term risks associated with the rescue plan remain and the state of the Greek economy can more accurately be evaluated as Ba1. Moody’s analysts believe that the situation in the Eurozone as a whole is unstable and this also has its negative consequences on the Greek economic crisis.

Bank of Greece immediately assessed the decision of one of the largest international credit rating agencies as “unjustified” and once again questioned the credibility of this type of institutions. Sharp was the reaction of the Greek financial ministry. “Today's decision of Moody's reflects the progress that has been made in recent months to stabilize public finances in no way,” says the official release of the office. The press release stressed that the agreement with the International Monetary Fund, the European Commission and the European Central Bank has been implemented as planned and that the resulting budget deficit was reduced by 40 percent compared to 2009 and the revenues from VAT increased by 6 per cent for the first three months of 2010, while for the same period last year they were reduced by 11 per cent.

Moody’s warned in April that it is possible to lower the credit rating of Greece. The Agency put the country in the Ba1 category of countries which are unable to fulfill their obligations to creditors, but gave it a stable outlook. In April, the other major international credit rating agency Fitch lowered its assessment for Greece with two points and placed it from BBB+  category in BB-, attaching negative expectations for the economic development of the country. The most skeptical about the fate of the Greek economy is the third large global agency Standard and Poor's, which also have lowered the credit rating of Greece by three degrees two months ago. Thus Greece has fallen from the BBB+ category to BB+ - the lowest at which investment in the country is recommended. This is the category of the so-called junk investments – speculative and of high risk.

Fears that Greece will defer payments on its foreign debt circulated openly in the European bank circles too. The Executive Manager of Deutsche Bank – Germany's largest commercial bank – assessed failure of Greece as inevitable. Josef Ackermann, who is known as the right hand of the Chancellor Angela Merkel, said that the rescue plan for the Greek economy was a failure and did not rule out the possibility the country to leave the Eurozone.

Tags: Economic crisisCredit ratingDebt reshedulingMarkets
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